Keeping politicians' hands off the Net & everything else related to technology
The U.S. Pledge of Allegiance represents a program of sorts, one designed to run on human brains and to output obedience. Like any program, however, the Pledge can suffer from bugs and submit to hacking. I thus offer you an upgraded Pledge, v. 2008:
I pledge allegiance to the laws of the United States of America, on condition that it respect my rights, natural, constitutional, and statuory, with liberty and justice for all.
Much of my draft paper, Private Prediction Markets and the Law, focuses on nuts-and-bolts fixes for the legal uncertainty that currently afflicts private prediction markets under U.S. law. I’ll say more about those in later posts to Agoraphilia and Midas Oracle. The paper also dicusses a more theoretical and general issue, though: The benefits of designing regulatory schemes to include exit options.
The Commodity Futures Trading Commission recently issued a request for comments about whether and how it should regulate prediction markets. In earlier papers, I explained why the CFTC cannot rightly claim jurisdiction over many types of prediction markets. I recap that view in my most recent paper, but add some suggestions about how the CFTC might properly regulate some types of prediction markets. In brief, I suggest that the CFTC build exit options into any regulations it writes for prediction markets, allowing those who run such markets the same sort of freedom of choice that U.S. consumers already enjoy, thanks to internet access to overseas markets like Intrade, with regard to using prediction markets. Here’s an excerpt from the paper:
Those practical limits on the CFTC’s power should encourage it to write any new regulations so as to allow qualifying prediction markets to operate legally, and fairly freely, under U.S. law. . . . Ideally, the CFTC would offer prediction markets something like these three tiers, each divided from the next with clear boundaries.
- Designated Contract Markets. Regulations designed for designated contract markets, such as the HedgeStreet Exchange, would apply to retail prediction markets that offer trading in binary option contracts and significant hedging functions.
- Exempt Markets. Regulations for “exempt” markets, which impose only limited anti-fraud and manipulation rules, would apply to prediction markets that:
- offer trading in binary option contracts;
- thanks to market capitalization limits or other CFTC-defined safe harbor provisions do not primarily support significant hedging functions; and
- offer retail trading on a for-profit basis.
- No Action Markets. A general “no action” classification, similar to the one now enjoyed by the Iowa Electronic Markets, would apply to any market that duly notifies traders of its legal status and that is either:
- a public prediction market run by a tax-exempt organization offering trading in binary option contracts but not offering significant hedging functions;
- a private prediction market offering trading in binary option contracts, but not significant hedging functions, only to members of a particular firm; or
- any prediction market that offers only spot trading in conditional negotiable notes.
Notably, regulation under either of the first two regimes would definitely afford a prediction market the benefit of the CFTC’s power to preempt state laws. It remains rather less clear whether the third and lightest regulatory regime would offer the same protection, though the cover afforded by its two “no action” letters has allowed the Iowa Electronic Markets to fend off state regulators. Markets that by default qualify for the third regulatory tier described above thus might want to opt into the second tier, so as to win a guarantee against state anti-gambling laws and the like. So long as they satisfy the first two conditions for such an “exempt market” status, public prediction markets run by non-profit organizations or private prediction markets that offer trading only to members of a particular firm should have that right. Why offer this sort of domestic exit option? Because it would, like the exit option already open to U.S. residents who opt to trade on overseas prediction markets, have the salutatory effect of curbing the CFTC’s regulatory zeal.
Please feel free to download the draft paper and offer me your coments.
[Crossposted at Agoraphilia, Technology Liberation Front, and Midas Oracle.]
I really enjoyed attending the Collective Intelligence FOO Camp, sponsored by Google and O’Reilly Media, last weekend. I’d been expecting a sort of geek slumber party, and had looked forward to rolling out my awesome Darth Vader impersonation. I was all set to cut loose with a growling, “I’m your father, Luke.” It didn’t quite come to that, but I still had a blast, meeting lots of smart, informed, articulate, creative, and successful people. Friendly people, too.
I described how to establish the legality of real money, open-access prediction markets under U.S. law. I called my presentation, Getting from Collective Intelligence to Collective Action [PPT file]. In very brief, I proposed this algorithm:
Just posted on SSRN: The Specter of Copyism v. Blockheaded Authors: How User-Generated Content Affects Copyright Policy. Here’s the abstract:
Technological advances, because they have radically lowered the costs of creating and distributing expressive works, have shaken the foundations of copyright policy. Once, those who held copyrights in sound recordings, movies, television shows, magazines, and the like could safely assume that the public would do little more than passively consume. Now, though, the masses have seized (peacefully acquired, really) the means of reproducing copyright works, making infringement cheap, easy, and, notwithstanding the law’s dictates, widespread. Copyright holders thus understandably fear that their customers have begun to treat expressive works like common property, free for all to use. That, the specter of copyism, does risk upsetting copyright policy, leading to a market failure in the production of expressive works. Even as we recognize that threat, however, we should also appreciate that technological advances have greatly reduced the costs of creating and distributing new works of authorship. Thanks to that deflation, we can increasingly count on authors who care little about the lucre of copyright – blockheads, as Samuel Johnson called them – to supply us with original expressive works. This paper describes the economic push and pull between distributed infringement and distributed authorship – between copyism and blockhead-created content, we might say – and how copyright policy should mediate those forces.
This free-standing article comes largely from various parts of chapters 1, 8, and 9 of my draft book, Intellectual Privilege: Copyright, Common Law, and the Common Good. As always, I welcome your comments.
[Posted at Intellectual Privilege, Agoraphilia, and The Technology Liberation Front.]
[NB: Updated; please see concluding paragraphs.]
As a matter of policy, we should favor love. It generates many private and public benefits. Individuals or communities short of love suffer terribly. Those rich in it thrive.
Please allow me to offer one small step towards encouraging love: An uncopyrighted (and thus public domain) card. Folding it for your love will prove your devotion, as the folds present a nice little origami challenge. A personalized card beats a store-bought one by a mile, too. Add messages inside and out, lock the heart up, hand it over, and brace yourself for some lovin’.
Here are some details:
If I might geek out for a moment, I’d like to offer some pertinent observations about copyright law. That I’ve uncopyrighted Folding Heart Card by no means guarantees that those who copy it will escape all liability. I have placed in the public domain only mywork of authorship—the image and the folds portrayed above. Another might claim copyright privileges over the same work, or some part of it. I claim Folding Heart Card as an original, but I must also admit that, by definition, unconscious copying remains a risk. So while I encourage you to copy the work as you see fit, and thereby honor both my love and your own, you must assume full responsibility for the outcome. I think, on net, you’ll like the results.
Two sharply contrasting views dominate the debate over copyright policy. On the one hand—the left one, we might say—copyrights represent mere policy tools, no better in principle than any other legal mechanism and, indeed, more modern, rationally planned, and democratically chosen that anything the common law can offer. On the other hand—the right hand, we might say—copyrights represent property rights no less than real estate or moveable goods do. On that view, copyrights deserve strict enforcement and our solemn respect.
[My draft book, Intellectual Privilege: Copyright, Common Law, and the Common Good, presents] copyright policy on a third hand. So grasped, copyright represents nothing better than a clumsy attempt to correct an alleged market failure. Common law rights, implemented by technological advances, social networks, and growing wealth, increasingly suffice to stimulate the production of original expressive works. Increasingly, we find that we do not need copyright. To that extent, it does us little good and much harm to remain imprisoned within the confines of the Copyright Act. Even if they wanted to, federal lawmakers could not put copyright policy into a delicate balance; they face powerful incentives to not even try. Better we should cast aside copyright’s statutory privileges and rely on the common law to promote the public good.
Many people—well-informed, intelligent, and sincere people—will doubtless disagree with this third view of copyright policy. Many will have good reasons for doing so, too. Some, though, will have perhaps been mislead by their reliance on an older, less flexible understanding of copyright—what we might call a circuit-switched model. In fact, however, we can best understand copyright policy, and much else, by following the example set by packet-switched networks.
[I earlier explained why copyrights do not qualify as natural rights under Locke’s theory of property. Here, I explain why the same holds true under Barnett’s positivist account of natural rights. Both passages come from my draft book, Intellectual Privilege: Copyright, Common Law, and the Common Good.]
Randy E. Barnett justifies natural rights conditionally, basing them on our appreciation of certain social goods. He emphasizes that “if we want a society in which persons can survive and pursue happiness, peace and prosperity, then we should respect the liberal conception of justice—as defined by natural rights—and the rule of law.” Not everyone values freedom, harmony, and wealth, of course. Most of us do, though, and together we easily number enough to enjoy the comforts and pleasures of human society.
We live together amicably because we recognize and respect certain natural rights. Which ones? Barnett names private property—including our property rights in our bodies—and freedom of contract. Since property protects both the right to it and the right against trespass, it corresponds to common law’s property and tort rules. Freedom of contract, which includes the right to contract and to not contract, corresponds to common law’s contract rules. Barnett’s description of natural rights thus matches the protections of persons, property, and promises at the heart of common law.
Barnett expressly includes “physical resources” in his description of property rights. “Such property rights are ‘natural’ insofar as, given the nature of human begins and the world in which they live, they are essential for persons living in society with others to pursue happiness, peace, and prosperity.” Do copyright rights qualify as natural on that description? Probably not.
[My forthcoming book spends a lot of time contrasting copyright with the common law. I thus thought that I should say at least a little about what I mean by the latter.]
[C]ommon law originates in custom, wins recognition in courts, and develops in commentary. Custom naturally comes first. It long ago gave rise to a set of social practices, such as avoiding bloodshed, honoring borders, and upholding oaths, that permit us to live in peace and prosperity. Referring to those and other customs helps common law courts to resolve our disputes justly. A judge might for instance determine reasonable conduct in a tort case by looking to community standards, award legal rights to someone who has long and openly used property entitled to another, or interpret a contract’s language by light of trade usage. In these and other ways custom inspires—if not mandates—the common law. Commentators, looking back over many court decisions and across many years, help us to follow the common law’s meandering path, explaining and rationalizing its wanderings. The common law thus develops from custom, through courts, and to commentary. [The below figure] illustrates.
All copyrighted works originate as ideas, born when authors choose how to express themselves. The slightest exercise of discretion will suffice; just about anything more original than an alphabetical listing of names can qualify for copyright protection. Once having crossed that low hurdle, it remains only for an author to fix her expression in a tangible medium for more than a transitory duration. She must, in other words, record her authorship. After thereby fixing her work—in words, music, pictures, computer code, architecture, or almost any expressive medium—she enjoys the rights afforded by the federal Copyright Act. Copyright thus inheres both in doodles and multi-million dollar movies, in works ranging in creativity from formulaic news blurbs to unprecedented paintings.
Those, copyright’s fundamental features, mark it as a distinct legal entity. Though laypeople often confuse copyrights with patents, trademarks, and other intangible goods, each of those related types of IP corresponds to a unique combination of subject matter and supporting law. [The figure below] illustrates how copyright relates to, and differs from, its nearest legal next-of-kin.
Works of authorship originate in private, safely kept under common law protections. Once published, however, expressive works become data ferae naturae—wild and natural information. As such, expressive works roam and reproduce freely. They may get captured in fixed copies, caged in atoms or bits. But the public, once it has absorbed an expressive work, generally retains relatively cheap access to it—unless and until copyright intervenes.
Copyright law limits public access to expressive works, herding them off the commons and into private hands. The Copyright Act offers a sort of ranch to authors, giving them a place to birth, raise, and sell their expressive works safe from the deprivations of grasping strangers. Authors enjoy those special privileges against the public not as a natural right, but rather solely thanks to a policy authorized by the U.S. Constitution and implemented through the Copyright Act. [The figure below] illustrates the path that copyright, together with some of its legal next-of-kin, takes from its origins towards its goals.
The Technology Liberation Front is the tech policy blog dedicated to keeping politicians' hands off the 'net and everything else related to technology.
